Student-Athletes Can Now Earn Money. Here Are the Pitfalls.

Sunisa Lee won three Olympic medals – gold, silver and bronze – and developed into a breakout star little known from outside the gymnastics world.

When she arrives at Auburn University in a few weeks, she will be among the first college Olympians to benefit from her name and likeness since the National Collegiate Athletic Association decided in June to allow college athletes to make money earn while keeping their amateur status.

For someone of her caliber, the payoff could be sizeable. Lesser-known Olympians are also likely to benefit financially, as are hundreds of college athletes in soccer and basketball, the two major revenue-generating sports.

But the NCAA ruling means student athletes have a new problem to consider. Many not only want to practice their sport, do an apprenticeship and represent their university, but also want to take the time to present themselves from their best side – and to benefit from it.

Navigating a new world of enticing financial prospects is not easy for anyone. But financial advisors and athletes’ agents said they were concerned that advertising firms were taking advantage of student athletes who have limited life experience and financial expertise.

“Michael Phelps has always benefited from name, image and likeness,” said Steve Trax, head of sports and entertainment for financial advisor MAI Capital, of the swimmer, who won 28 Olympic medals. “What has changed is social media. It has expanded the possibilities not only for your premium athletes, but also for Olympic athletes and athletes in niche sports. “

Members of an elite college program, like the University of Florida’s softball team, might not have national notoriety or career prospects, he said, but they still have income opportunities.

“In a college town like Gainesville, some of these elite athletes in such a sport will have unique opportunities at a pizza place or sports store,” said Trax, although those players will be on the lookout for offers worth tens of thousands of dollars, not hundreds of thousands of dollars or more.

“This is where the NCAA decision can be really helpful and beneficial in distributing the wealth among other college athletes,” he added. “What I hope is not that the almighty dollar is driving the day.”

The conversation needs to start with these student-athletes and their parents understanding their obligations under a marketing contract.

“This is new territory and these athletes need someone to teach them what they are okay with,” said Michael Liersch, director of advice and planning, Wells Fargo’s wealth and investment management division. “It’s more specific when it’s a traditional merchandise deal. But when it comes to allowing your name and picture on sponsored social media or videos on YouTube and Twitter, it gets more complicated. “

Mr Liersch said he was also concerned that the headline-grabbing deals some athletes are likely to sign could negatively impact younger players.

“There will be one person who will make an amazing offer, and that will set the narrative,” he said. “Children will want to be this aspiring athlete. That may not be the right focus given the alternative of focusing on education or a longer-term career. “

Mr. Trax said he was helping a family friend who plays basketball in the Big East Conference negotiate several advertising deals.

“I reviewed three contracts and made aggressive changes to each one, in terms of the basic contract language, but also the terms of payment and the athlete’s obligations,” he said. “It’s an exciting, attractive area, but the potential customer base is ready to be used.”

Joe McLean, managing partner of Intersect Capital, which manages money for several professional basketball and golf players, said he feared players would be distracted by the lure of taking advantage of their image.

Mr. McLean, who played basketball at the University of Arizona, said that when he was young and dreamed of greatness in the National Basketball Association, he had a Larry Bird poster on his wall.

“I didn’t have a picture of an NBA check,” he said. “Well, the dollar signs are part of that dream. Having two dreams doesn’t usually work. You must have a dream and everything else will come true. “

At the same time, Mr. McLean is working with his alma mater on developing a program, Arizona Edge, to help student-athletes understand and nurture their personal brands.

“It’s about how to negotiate deals, how to have a growth mindset, how to define your intellectual property,” he said. “A lot of people will monetize the athlete and not the other way around. That should help the athlete. “

The financial advisors also said they were concerned that universities would simply enter into blanket marketing agreements on behalf of their athletes. While the students would share in the revenue, most of the money would go to the universities.

Others asked if universities might need to step in to ensure that not just a few athletes take up all of the advertising funds.

“Most athletes who don’t play football or men’s basketball are not going to change their lives,” said EJ Kahn, advisor at Wells Fargo Advisors. “The solution is something like Title IX, a mandatory solution to even support the playing field between men and women. Without the NCAA joining them, there will be drastic inequality. “

The advisors pointed out three types of athletes who could benefit most from the new rules: soccer and basketball stars who would previously have been tricked into dropping out of college; Female athletes who could become professional; and outstanding athletes in lesser-known sports with little or no career prospects.

Ronnie Brown, an Atlanta financial advisor who played for Auburn Football and was drafted by the Miami Dolphins in 2005, saw benefits from the NCAA program for both college players like him and those who wouldn’t play professionally.

“Once you go to college, you’re just one step away from being a young adult who is expected to make your own way,” said Mr. Brown. “That forces you to take on a lot more responsibility.”

The earning power of some female athletes in college may actually be higher than that of amateurs.

“Women athletes make a lot less than men when they go pro, but they have a huge following in college,” said Sharon Klein, president of family wealth for the Wilmington Trust. “It could really help women.”

Then there are the sports that have niche following. Your athletes can benefit from local opportunities or get sponsors from companies that focus on sports enthusiasts such as archery or fencing.

Several consultants recommended college athletes to have a broader plan than making one-off agreements.

“You have to ask: ‘How does that fit into my overall plan?'” Said Ms. Klein. “That positions these athletes much better for success. It’s about this financial education. “

This can benefit all student athletes, regardless of what they do after college.

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